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Brown & Brown, Inc. Announces Quarterly Revenues of $404.7 Million, an Increase of 3.0%; and Earnings per Share of $0.41


/EINPresswire.com/ -- DAYTONA BEACH, FL--(Marketwired - January 25, 2016) - Brown & Brown, Inc. (NYSE: BRO) (the "Company") today announced its unaudited financial results for the fourth quarter of 2015. 

Revenues for the fourth quarter of 2015 under U.S. generally accepted accounting principles ("GAAP") were $404.7 million, increasing $11.6 million, or 3.0%, as compared to the fourth quarter of the prior year, with Organic Revenue (as defined below) increasing by 2.5%. Diluted earnings per share under GAAP were $0.41 and $0.38 on an adjusted basis, an increase of 5.6% as detailed in the schedules below.

Revenues for the twelve months ended December 31, 2015 under GAAP were $1,660.6 million, increasing $84.8 million, or 5.4%, as compared to the same period of 2014, with Organic Revenue (as defined below) increasing by 2.6%. Diluted earnings per share for the twelve months ended December 31, 2015 under GAAP were $1.70 compared to $1.41 for the same period of 2014, representing a 20.6% increase. On an adjusted basis, the earnings per share for the twelve months ended December 31, 2015 were $1.67 as compared to $1.63 for the same period in 2014, an increase of 2.5%.

J. Powell Brown, President and Chief Executive Officer of the Company, noted, "We are pleased with the continued improved performance we delivered in the fourth quarter and the outlook for our business moving forward."

In the fourth quarter of 2015, the Company initiated a $75 million accelerated share repurchase program (ASR), which was completed in January 2016. The ASR completed the remainder of the $200 million board-approved repurchase plan announced in July 2014 and was part of the $400 million board-approved repurchase plan announced in July 2015. Following completion of the ASR, the Company had remaining authorization to repurchase up to an additional $375 million of the Company's common stock.

                                                                            
                            Brown & Brown, Inc.                             
                          INTERNAL GROWTH SCHEDULE                          
                         Organic Revenue Growth (1)                         
               Three Months Ended December 31, 2015 and 2014                
                          (in millions, unaudited)                          
                                                                            
                                                                   Organic  
                                                                   Revenue  
                     Quarter Ended        Change     Acquisition Growth (1) 
                 12/31/2015 12/31/2014   $      %     Revenues     $     %  
                 ---------- ---------- ------ ------ ----------- ----- -----
                                                                            
Retail(2)        $    210.5 $    197.1 $ 13.4   6.8% $       9.7 $ 3.7  1.9%
National                                                                    
 Programs             104.3      100.6    3.7   3.7%         1.3   2.4  2.4%
Wholesale                                                                   
 Brokerage             47.1       43.6    3.5   8.0%         0.8   2.7  6.2%
Services               34.2       33.8    0.4   1.2%           -   0.4  1.2%
                 ---------- ---------- ------ ------ ----------- ----- -----
Total Core Comm.                                                            
 and Fees        $    396.1 $    375.1 $ 21.0   5.6% $      11.8 $ 9.2  2.5%
                 ---------- ---------- ------ ------ ----------- ----- -----
                                                                            
                                                                            
                            Brown & Brown, Inc.                             
                          INTERNAL GROWTH SCHEDULE                          
                         Organic Revenue Growth (1)                         
               Twelve Months Ended December 31, 2015 and 2014               
                          (in millions, unaudited)                          
                                                                            
                                                                   Organic  
                                                                   Revenue  
                      Year Ended          Change     Acquisition Growth (1) 
                 12/31/2015 12/31/2014   $      %     Revenues     $     %  
                 ---------- ---------- ------ ------ ----------- ----- -----
                                                                            
Retail(2)        $    836.1 $    789.5 $ 46.6   5.9% $      35.6 $11.0  1.4%
National                                                                    
 Programs             412.9      367.7   45.2  12.3%        38.5   6.7  1.8%
Wholesale                                                                   
 Brokerage            200.8      187.3   13.5   7.2%         2.5  11.0  5.9%
Services              145.4      136.1    9.3   6.8%           -   9.3  6.8%
                 ---------- ---------- ------ ------ ----------- ----- -----
Total Core Comm.                                                            
 and Fees        $  1,595.2 $  1,480.6 $114.6   7.7% $      76.6 $38.0  2.6%
                 ---------- ---------- ------ ------ ----------- ----- -----
                                                                            
  1. "Organic Revenue" is defined as total commissions and fees less (i) the first twelve months of net commission and fee revenues generated from acquisitions accounted for as purchases less (ii) profit-sharing contingent commissions (revenues from insurance companies based upon the volume and the growth and/or profitability of the business placed with such companies during the prior year - "Contingents"), less (iii) guaranteed supplemental commissions (commissions from insurance companies based solely upon the volume of the business placed with such companies during the current year - "GSCs"), and less (iv) divested business (net commissions and fees generated from offices, books of business or niche businesses sold by the Company) with the associated revenue removed from the corresponding period of the prior year.
  2. The Retail Segment includes commissions and fees, which will be reported in the "Other" column of the Segment Information in the Notes to the Consolidated Financial Statements on the Company's Form 10-K, which includes corporate and consolidation items.
                                                                            
                            Brown & Brown, Inc.                             
                 RECONCILIATION OF INTERNAL GROWTH SCHEDULE                 
                       TO TOTAL COMMISSIONS AND FEES                        
             Included in the Consolidated Statements of Income              
          Three and Twelve Months Ended December 31, 2015 and 2014          
                          (in millions, unaudited)                          
                                                                            
                                     Quarter Ended          Year Ended      
                                 12/31/2015 12/31/2014 12/31/2015 12/31/2014
                                 ---------- ---------- ---------- ----------
                                                                            
Total Core Commissions and Fees  $   396.1  $   375.1  $ 1,595.2  $ 1,480.6 
  Profit-Sharing Contingent                                                 
   Commissions                          6.0        8.2       51.8       57.7
  Guaranteed Supplemental                                                   
   Commissions                          2.0        2.3       10.0        9.9
  Divested Businesses                     -        4.6          -       19.3
                                 ---------- ---------- ---------- ----------
                                                                            
Total Commissions and Fees       $   404.1  $   390.2  $ 1,657.0  $ 1,567.5 
                                 ---------- ---------- ---------- ----------
                                                                            

Due to a pre-tax credit adjustment of $8.1 million on non-cash stock-based compensation and a net change in the change estimated acquisition earn-out payables of $2.6 million, we believe it is appropriate to adjust for the margin impact of these items in order to arrive at results that are more comparable to the prior year. After these adjustments, our diluted Earnings Per Share - Adjusted (as defined below) were $0.38 for the three months ended December 31, 2015, increasing 5.6%. For the twelve months ended December 31, 2015, adjusting for the items noted above Earnings Per Share - Adjusted (as defined below) were $1.67 compared to $1.63 in the prior year after adjusting for a pre-tax loss of $47.4 million associated with the sale of certain assets of Axiom Re, a subsidiary of the Company, a pre-tax credit adjustment of $5.9 million on non-cash stock-based compensation, and the net change in the change estimated acquisition earn-out payables of $7.0 million.

                                                                            
                            Brown & Brown, Inc.                             
                 GAAP EARNINGS PER SHARE RECONCILIATION TO                  
                       EARNINGS PER SHARE - ADJUSTED                        
               Three Months Ended December 31, 2015 and 2014                
                                (unaudited)                                 
                                                                            
                                         Quarter Ended           Change     
                                    12/31/2015  12/31/2014     $        %   
                                    ----------- ----------- -------- -------
GAAP earnings per share - as                                                
 reported                           $     0.41  $     0.17  $  0.24   141.2%
  Loss on disposal                           -        0.21    (0.21)        
  Non-cash stock-based compensation                                         
   adjustment                            (0.03)      (0.03)       -         
  Change in estimated acquisition                                           
   earn-out payables                         -        0.01    (0.01)        
                                    ----------- ----------- --------        
Earnings per share - adjusted       $     0.38  $     0.36  $  0.02     5.6%
                                    ----------- ----------- --------        
                                                                            
                                                                            
                            Brown & Brown, Inc.                             
                 GAAP EARNINGS PER SHARE RECONCILIATION TO                  
                       EARNINGS PER SHARE - ADJUSTED                        
               Twelve Months Ended December 31, 2015 and 2014               
                                (unaudited)                                 
                                                                            
                                         Year Ended              Change     
                                 12/31/2015 (3) 12/31/2014     $        %   
                                 -------------- ----------- -------- -------
GAAP earnings per share - as                                                
 reported                        $        1.70  $     1.41  $  0.29    20.6%
  Loss on disposal                           -        0.21    (0.21)        
  Non-cash stock-based                                                      
   compensation adjustment               (0.03)      (0.03)       -         
  Change in estimated                                                       
   acquisition earn-out payables          0.01        0.04    (0.03)        
                                 -------------- ----------- --------        
Earnings per share - adjusted    $        1.67  $     1.63  $  0.04     2.5%
                                 -------------- ----------- --------        
                                                                            
  1. Column does not add, due to cumulative effect of rounding on individual items.

In order to provide a better understanding of our business, we evaluate EBITDAC (defined below) performance. EBITDAC for the fourth quarter of 2015 was $133.1 million, an increase of $53.0 million or 66.2%, compared to the fourth quarter of the prior year. The associated EBITDAC Margin (defined below) increased to 32.9%. For the reasons stated above, we believe EBITDAC - Adjusted (as defined below) provides a more appropriate comparison to the prior year. EBITDAC - Adjusted increased 2.8% to $125.0 million for the fourth quarter of 2015 as compared to the fourth quarter of the prior year.

                                                                            
                            Brown & Brown, Inc.                             
                           GAAP RECONCILIATION -                            
                 INCOME BEFORE INCOME TAXES TO EBITDAC (4)                  
          Three and Twelve Months Ended December 31, 2015 and 2014          
                          (in millions, unaudited)                          
                                                                            
                                     Quarter Ended          Year Ended      
                                 12/31/2015 12/31/2014 12/31/2015 12/31/2014
                                 ---------- ---------- ---------- ----------
Income before income taxes       $    95.2  $    38.7  $   402.8  $   339.9 
  Amortization                        22.0       22.4       87.4       82.9 
  Depreciation                         5.3        5.6       20.9       20.9 
  Interest                             9.8       10.0       39.2       28.4 
  Change in estimated                                                       
   acquisition earn-out payables       0.8        3.4        3.0       10.0 
                                 ---------- ---------- ---------- ----------
EBITDAC                          $   133.1  $    80.1  $   553.3  $   482.1 
EBITDAC Margin(5)                     32.9%      20.4%      33.3%      30.6%
                                                                            
  1. "EBITDAC" is defined as income before income taxes less amortization, depreciation, interest, and the change in estimated acquisition earn-out payables.
  2. "EBITDAC Margin" is defined as EBITDAC divided by total revenues.
                                                                            
                            Brown & Brown, Inc.                             
                         EBITDAC RECONCILIATION TO                          
                           EBITDAC (4) - ADJUSTED                           
               Three Months Ended December 31, 2015 and 2014                
                          (in millions, unaudited)                          
                                                                            
                                         Quarter Ended           Change     
                                    12/31/2015  12/31/2014     $        %   
                                    ----------- ----------- -------- -------
EBITDAC                             $    133.1  $     80.1  $  53.0    66.2%
  Loss on disposal                           -        47.4    (47.4)        
  Non-cash stock-based compensation                                         
   adjustment                             (8.1)       (5.9)    (2.2)        
                                    ----------- ----------- --------        
EBITDAC - adjusted                  $    125.0  $    121.6  $   3.4     2.8%
                                                                            
                                                                            
                            Brown & Brown, Inc.                             
                         EBITDAC RECONCILIATION TO                          
                           EBITDAC (4) - ADJUSTED                           
               Twelve Months Ended December 31, 2015 and 2014               
                          (in millions, unaudited)                          
                                                                            
                                          Year Ended             Change     
                                    12/31/2015  12/31/2014     $        %   
                                    ----------- ----------- -------- -------
EBITDAC                             $    553.3  $    482.1  $  71.2    14.8%
  Loss on disposal                           -        47.4    (47.4)        
  Non-cash stock-based compensation                                         
   adjustment                             (8.1)       (5.9)    (2.2)        
                                    ----------- ----------- --------        
EBITDAC - adjusted                  $    545.2  $    523.6  $  21.6     4.1%
                                                                            
                                                                            
                            Brown & Brown, Inc.                             
                      EBITDAC MARGIN RECONCILIATION TO                      
                       EBITDAC MARGIN (5) - ADJUSTED                        
          Three and Twelve Months Ended December 31, 2015 and 2014          
                          (in millions, unaudited)                          
                                                                            
                                     Quarter Ended          Year Ended      
                                 12/31/2015 12/31/2014 12/31/2015 12/31/2014
                                 ---------- ---------- ---------- ----------
EBITDAC margin                        32.9%      20.4%      33.3%      30.6%
  Loss on disposal                       -       12.0          -        3.0 
  Non-cash stock-based                                                      
   compensation adjustment            (2.0)      (1.5)      (0.5)      (0.4)
                                 ---------- ---------- ---------- ----------
EBITDAC margin - adjusted             30.9%      30.9%      32.8%      33.2%
                                                                            
                                                                            
                            Brown & Brown, Inc.                             
                     CONSOLIDATED STATEMENTS OF INCOME                      
               (in millions, except per share data; unaudited)              
                                                                            
                             For the three months     For the twelve months 
                              ended December 31,       ended December 31,   
                           ------------------------ ------------------------
                               2015        2014         2015        2014    
                           ------------ ----------- ------------ -----------
REVENUES                                                                    
Commissions and fees       $     404.1  $     390.2 $   1,657.0  $   1,567.5
Investment income                  0.3          0.2         1.0          0.7
Other income, net                  0.3          2.7         2.6          7.6
                           ------------ ----------- ------------ -----------
  Total revenues                 404.7        393.1     1,660.6      1,575.8
                           ------------ ----------- ------------ -----------
                                                                            
EXPENSES                                                                    
Employee compensation and                                                   
 benefits                        213.3        208.1       841.4        791.7
Non-cash stock-based                                                        
 compensation                     (1.8)         0.1        15.5         19.3
Other operating expenses          59.4         57.4       251.0        235.3
Loss (Gain) on disposal            0.7         47.4        (0.6)        47.4
Amortization                      22.0         22.4        87.4         82.9
Depreciation                       5.3          5.6        20.9         20.9
Interest                           9.8         10.0        39.2         28.4
Change in estimated                                                         
 acquisition earn-out                                                       
 payables                          0.8          3.4         3.0         10.0
                           ------------ ----------- ------------ -----------
  Total expenses                 309.5        354.4     1,257.8      1,235.9
                           ------------ ----------- ------------ -----------
                                                                            
Income before income taxes        95.2         38.7       402.8        339.9
                                                                            
Income taxes                      37.1         14.1       159.2        132.9
                           ------------ ----------- ------------ -----------
                                                                            
Net income                 $      58.1  $      24.6 $     243.6  $     207.0
                           ============ =========== ============ ===========
                                                                            
Net income per share:                                                       
  Basic                    $      0.41  $      0.17 $      1.72  $      1.43
                           ============ =========== ============ ===========
  Diluted                  $      0.41  $      0.17 $      1.70  $      1.41
                           ============ =========== ============ ===========
                                                                            
Weighted average number of                                                  
 shares outstanding:                                                        
  Basic                        136,710      140,024     137,810      140,944
                           ============ =========== ============ ===========
  Diluted                      139,113      142,240     140,112      142,891
                           ============ =========== ============ ===========
                                                                            
Dividends declared per                                                      
 share                     $      0.12  $      0.11 $      0.45  $      0.41
                           ============ =========== ============ ===========
                                                                            
                            Brown & Brown, Inc.                             
                        CONSOLIDATED BALANCE SHEETS                         
               (in millions, except per share data, unaudited)              
                                                                            
                                                  December 31,  December 31,
                                                      2015          2014    
                                                 ------------- -------------
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                      $      443.4  $      470.0 
  Restricted cash and investments                       229.8         259.8 
  Short-term investments                                 13.7          11.2 
  Premiums, commissions and fees receivable             433.9         424.6 
  Reinsurance recoverable                                32.0          13.0 
  Prepaid reinsurance premiums                          309.6         321.0 
  Deferred income taxes                                  24.6          25.4 
  Other current assets                                   50.4          45.5 
                                                 ------------- -------------
    Total current assets                              1,537.4       1,570.5 
                                                                            
Fixed assets, net                                        81.8          84.7 
Goodwill                                              2,586.7       2,460.6 
Amortizable intangible assets, net                      744.7         784.6 
Investments                                              18.1          19.9 
Other assets                                             44.1          36.6 
                                                 ------------- -------------
    Total assets                                 $    5,012.8  $    4,956.9 
                                                 ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
Current liabilities:                                                        
Premiums payable to insurance companies          $      574.7  $      568.1 
  Losses and loss adjustment reserve                     32.0          13.0 
  Unearned premiums                                     309.6         321.0 
  Premium deposits and credits due customers             83.1          83.3 
  Accounts payable                                       63.9          57.3 
  Accrued expenses and other liabilities                192.3         181.3 
  Current portion of long-term debt                      73.1          45.6 
                                                 ------------- -------------
    Total current liabilities                         1,328.7       1,269.6 
                                                                            
Long-term debt                                        1,079.9       1,152.8 
                                                                            
Deferred income taxes, net                              360.9         341.5 
                                                                            
Other liabilities                                        93.6          79.2 
                                                                            
Shareholders' equity:                                                       
  Common stock, par value $0.10 per share;                                  
   authorized 280,000 shares; issued 146,415                                
   shares and outstanding 138,985 shares at                                 
   2015, issued 145,871 shares and outstanding                              
   143,486 shares at 2014 - in thousands                 14.6          14.6 
  Additional paid-in capital                            426.5         406.0 
  Treasury stock, at cost 7,430 and 2,385 shares                            
   at 2015 and 2014, respectively - in thousands       (238.8)        (75.0)
  Retained earnings                                   1,947.4       1,768.2 
                                                 ------------- -------------
    Total shareholders' equity                        2,149.7       2,113.8 
                                                 ------------- -------------
    Total liabilities and shareholders' equity   $    5,012.8  $    4,956.9 
                                                 ============= =============
                                                                            

Conference call, webcast and slide presentation
A conference call to discuss the results of the fourth quarter of 2015 will be held on Tuesday, January 26, 2016 at 8:00 AM (EST). The Company may refer to a slide presentation during its conference call. You can access the webcast and the slides from the "Investor Relations" section of the Company's website at www.bbinsurance.com.

About Brown & Brown
Brown & Brown, Inc., through its subsidiaries, offers a broad range of insurance products and services. Additionally, certain Brown & Brown subsidiaries offer a variety of risk management, third-party administration, and other services. Serving business, public entity, individual, trade and professional association clients nationwide, the Company is ranked by Business Insurance magazine as the United States' sixth largest independent insurance intermediary. The Company's Web address is www.bbinsurance.com.

Forward-looking statements
This press release may contain certain statements relating to future results which are forward-looking statements, including those relating to the Company's anticipated financial results for the fourth quarter and full year of 2015 and those relating to potential repurchases of the Company's common stock. These statements are not historical facts, but instead represent only the Company's current belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that the Company's actual results, financial condition and achievements may differ, possibly materially, from the anticipated results, financial condition and achievements contemplated by these forward-looking statements. These risks and uncertainties include, but are not limited to, the Company's determination as it finalizes its financial results for the fourth quarter and full year of 2015 that its financial results differ from the current preliminary unaudited numbers set forth herein; fluctuations in the Company's stock's market price; fluctuations in operating results and cash flows; material adverse changes in economic conditions in the markets we serve and in the general economy; downward commercial property and casualty premium pressures; future regulatory actions and conditions in the states in which the Company conducts business; competition from others in the insurance agency, wholesale brokerage, insurance programs and service business; the integration of the Company's operations with those of businesses or assets the Company has acquired or may acquire in the future and the failure to realize the expected benefits of such integration; the potential occurrence of a disaster that affects certain areas including, but not limited to, the States of California, Florida, Georgia, Illinois, Indiana, Kansas, Massachusetts, Michigan, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas, Virginia and/or Washington, where significant portions of the Company's business are conducted; and other factors that the Company may not have currently identified or quantified, and other risks, relevant factors and uncertainties identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, and the Company's other filings with the Securities and Exchange Commission. All forward-looking statements made herein are made only as of the date of this release, and the Company does not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which the Company hereafter becomes aware. 

Non-GAAP supplemental financial information
This press release contains references to non-GAAP financial measures as defined in Regulation G of SEC rules, including Organic Revenue, Earnings Per Share - Adjusted, EBITDAC, EBITDAC - Adjusted and EBITDAC Margin. A reconciliation of this supplemental non-GAAP financial information to the Company's GAAP information is contained in this earnings release. We present such non-GAAP supplemental financial information, as we believe such information is of interest to the investment community because it provides additional meaningful methods of evaluating certain aspects of the Company's operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis. This supplemental financial information should be considered in addition to, not in lieu of, the Company's condensed consolidated financial statements.

R. Andrew Watts
Chief Financial Officer
(386) 239-5770


Distribution channels: Insurance Industry


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